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Real Time Information: too much, too soon?

April 6 ushers in the 2013/14 tax year in the UK and along with it the usual tweaks and adjustments to personal and corporate financial rules, some familiar rate fiddling and new government schemes set to be unfurled over the course of the year.

Included in this cluster of new legislation is the introduction of RTI (Real Time Information), which means UK businesses will have to submit their payroll information inreal time.

In contrast to the present system of filing their employees’ payroll information with HMRC annually, from April businesses must instead file salary, income tax and National Insurance information on or before each payday.

Quite a logistical change on the accountancy front, so big in fact that it’s been described as the biggest change in payroll since the introduction of Pay As You Earn (PAYE) in 1944. As such, its introduction has proved controversial. SME owners and accountants alike have been critical of HMRC’s handling of the legislation.

Many believe that the new rules have been brought into force too quickly and that businesses (and possibly HMRC itself) will not be prepared come April. The Institute of Chartered Accountants in England and Wales (ICAEW) called the planned changeover to RTI as “at best unrealistic and at worst impossible”, while MPs on the Public Accounts Committee were similarly unimpressed, concluding that HMRC“did not convince” them on the matter.

To further exacerbate concern in business circles, accountancy costs - already one of the most significant outlays for SMEs - also look set to rise. A survey by Iris in November found that around two-thirds of accountancy firms were planning to increase their fees as a result of RTI. Meanwhile, those managing their own accounts must purchase new payroll software (unless they use an online accounting solution that includes upgrades in their price) or suffer the ignominy of submitting payroll information via HMRC’s clunky Basic PAYE Tools every month.

Unfortunately, then, in the short term, RTI promises to be a complicated and costly burden for small businesses and the self-employed.

Despite the concerns, HMRC stills plans on going ahead with rollout of RTI in April. Thankfully, though, it has made one small concession and agreed not to issue any RTI non-compliance penalties during the first year the scheme is in operation. Rather than financially punishing non-compliant businesses, HMRC appears keener on using RTI’s first year of operation to educate businesses about the new rules.

There’s a fair amount to learn, so use the next few months wisely and try to get you and your business up to speed.